Pricey Generics Draw Senate Scrutiny

Digoxin price tag triggers investigation.

Robert Frankil, RPh, was dismayed when a customer accused him of price gouging. The cost of the customer's congestive heart failure medication, digoxin, had risen from $15 last year to $120 in 2014.

"I had nothing to do with the price spike, and I couldn't do anything about it," he said.

Frankil, the president of Sellersville Pharmacy, in Sellersville, Penn., said the recent price increase in many generic drugs has also hurt his business, since pharmacy benefit managers often reimburse Frankil at the lower "pre-spiked" rate. This means Frankil is forced to decide between refusing to fill a drug order or accepting the losses.

"We usually lose money and fill the script," he said.

The sharp increase in generic drug costs over the last 18 months is the focus of a federal investigation and a new bill that came before a Senate subcommittee Thursday. In October, members of Congress sent letters to 14 drug manufacturers demanding an explanation for the rising prices.

"More than one out of four Americans do not fill their prescriptions because they cannot afford the cost," said Sen. Bernie Sanders (I-Vt.) chairman of the Senate Subcommittee on Primary Health and Aging in his opening remarks.

Sanders and Rep. Elijah Cummings (D-Md.), ranking member of the House Committee on Oversight and Government Reform, introduced a bill that would require generic drug companies to provide rebates to Medicaid if the price of their products increases faster than the rate of inflation. Brand name drugs are already held to this standard, but generics are not.

"Congress should fix this loophole immediately," Sanders said.

Industry experts, patients, economists, doctors, and pharmacists, including Frankil, shared their perspectives on the cost problem at Thursday's hearing.

Federal records presented at the hearing documented that from July 2013 to July 2014 almost 10% of generic drugs more than doubled in price, according to reports from the Centers for Medicare and Medicaid Services. In that same period 1,215 generic drugs increased in price by 448%.

Sanders said he invited the CEOs of three pharmaceutical companies -- Teva Pharmaceutical Industries, Lanett Company, and Marathon Pharmaceuticals -- to the hearing. All three declined.

Sen. Richard Burr (R-N.C.) does not support the new bill. He attributes the rising cost of generic drugs to new regulations such as the first generic drug user fee agreement in 2012, which was intended to help high quality drugs reach the market faster.

In 2011, the median time for generic drug approvals was 31 months after implementing generic user fees. "It's now taking longer for generic drugs to be approved by the FDA. Thirty-six months and counting," he said.

"Taxes, fees, and regulatory burdens are driving up the costs of doing business. When the cost of doing business goes up, the market responds and adjusts," Burr said.

"If we're going to point a finger at why healthcare costs are increasing, we should start by pointing at ourselves and asking if the polices that we're implementing are helping or hurting."

Scott Gottlieb, MD, a resident fellow at the American Enterprise Institute in Washington, agreed with Burr that "higher barriers to entry" in the drug market were to blame for the increases in generic drug prices.

Gottlieb added that the overall cost of generic drugs to the system was probably declining, according to his data, but that low-volume drugs might be the reason for "exorbitant" price increases.

"As drugs fall out of favor clinically as utilization diminishes, there are going to be fewer manufacturers for those drugs. As fewer manufacturers remain on the market, they're going to take price increases in part to take advantage of their position in the market and also in part because they have to amortize the cost of manufacturing those drugs over fewer patients."

Gottlieb said these trends will be "self-correcting." When these manufacturers increase their revenues, other manufacturers will be drawn to the market.

Aaron Kesselheim, MD, JD, MPH, an associate professor of medicine at Brigham and Women's Hospital and Harvard Medical School, said the FDA should fast-track applications and waive user fees to bring more generic drugs onto the market more quickly. Burr agreed with Kesselheim's suggestions.

Stephen Schondelmeyer, PharmD, PhD, professor and director of the PRIME Institute at the University of Minnesota College of Pharmacy in Minneapolis, said that cost structure and the burdens on drug companies are only one factor in the price spikes.

"That may explain 2, 5, 10% increases," he said.

"You can't show me in aggregate all of the regulations and all of the behaviors in the market that would justify a 100% increase in the last year or a 1,000% increase."

Schondelmeyer also said that some of the drugs whose prices had shot up were not low-volume drugs. He named pravastatin and levothyroxine as two examples. Pravastatin is a top 20 drug and levothyroxine ranks among the top five in sales.

"The markets are broken and we need to do something to fix it. I think the government needs to step in and monitor and develop solutions."

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